Weighing in on sports sponsorship

The global economic downturn has impacted on sports sponsorship, but in 2013 the local industry still reported more growth than the international sector.

South Africa’s sports sponsorship investment weighed in at R7.5 billion last year in what pundits call a “relatively conservative period”. The number included direct sponsorship of teams and events, as well as broadcast rights and leverage.

BMi’s Dave Sidenberg says the company forecast the sector to grow to R4.9 billion in direct spend on rights fees in 2013 but that growth in the sector was higher than expected and, at 8.6%, better than the previous two years. “If we include the R2.5 billion-plus sponsors also spent on leveraging their sponsorships (this includes all expenditures sponsors incur to promote, advertise and stage their sponsorship/events), the overall market was worth over R7.5 billion in 2013,” he says.

Sidenberg says the economy, coupled with recent controversies surrounding top athletes, threw the spotlight on sport. “Add to this the growing list of match-fixing allegations in cricket, football and now even some of the other lower profile codes, and it is no wonder many corporate sponsors are taking a pause from the action,” he says. “For sports, and the brands that sponsor those sports or sports people, recent times have been more tumultuous than ever.”

Simon Franklin, chief operating officer of sports marketing company Megapro says there is no doubt that the economic downturn has had a significant impact on sponsorship and sponsorship spend over the past four years. “Coupled with the ‘hangover’ following the 2010 FIFA World Cup, the impact cannot be underestimated,” he says.

Nevertheless, the industry is “healthy”, he says, and sponsorships are delivering on their strategic objectives.

“Certainly entities that are keen to sponsor are significantly better informed than pre-2010 and most are very aware of their objectives, so it makes partnering the potential sponsors with the correct property easier,” he says.

The impending crossover to digital terrestrial television (DTT) will affect the sector, experts agree. Franklin says there is an “element of uncertainty” as to what impact this will have on future broadcast rights deals. “Ultimately the demand will always be there whether on free-to-air or pay TV. Broadcasters know the value of sport and what financial benefits a good product can bring to them, irrespective of their revenue model,” he says.

Sidenberg believes there is a “direct correlation between hours of broadcast coverage and sponsorship funding”. He says the ongoing delays in the DTT rollout have been a “great disappointment” for the sports industry. This is particularly true of the sports codes battling to get television exposure, he says. DTT will “dramatically affect the number of stations the average man in the street will have access to”.

He says the DStv platform remains in dominant control of all top sports rights – something the new entrants have been unable to acquire – and, as has been witnessed with Top TV (now StarSat), without sport, television stations will battle to get traction. “Soccer content will clearly be a key component of any serious newcomer’s future offering,” Sidenberg says.

Len van Heerden, sponsorship accounts manager at DStv Media Sales, says the SuperSport channels have felt the financial squeeze, particularly where leveraging sponsorship is concerned. “Leverage budgets have been decimated,” he says. “And margins are under pressure.” Nevertheless, SuperSport is “in a good place”, he says.

Van Heerden believes the challenge lies in “offering more in second-screen experiences”. But this is still in its infancy, and there are no benchmarks by which to measure success. “There’s a long way to go,” he says.

What the squeeze means is that sponsors have become more savvy with their spend. “More and more rights holders are also now heeding the advice to adopt a ‘batteries included’ approach to their packages in an effort to help ensure their sponsors activate the properties more effectively,” says Sidenberg.

Van Heerden agrees. “They’re buying commercials, squeeze backs, stings and competitions – there are a wide variety of mechanisms brands use to take ownership of their space,” he says.

Franklin says the industry as a whole is “in good health”. He believes sponsors who are more focused on return on investment (ROI) than simple branding are implementing lessons learned from the 2010 World Cup.

“There is huge interest in the digital space but I believe we are still some way off being able to deliver to the same level as Europe and America, largely due to bandwidth and access to smart phones,” he says.

Sponsorship, he says, offers brands “unique opportunities to engage directly with their target markets. It provides platforms for messaging and interaction unlike any other advertising/marketing medium”.

It is, however, an expensive medium so what kind of ROI are large sponsors looking for?

Alastair Hewitt, South African Breweries’ general manager of Castle Lager and sports sponsorship, says the key drivers are less about cost and more about connecting and engaging with consumers. “Sponsorships provide an opportunity to engage with consumers around their passion points, as well as contributing to the development of our society. Castle Lager is the flagship brand of SAB and its stated objective of bringing people together is a perfect fit for mass viewing and participation sports such as football, rugby and cricket,” he says.

Hewitt says Castle Lager sponsors the South African national test and one-day international cricket teams, the Tri-Nations rugby tournament, the Springboks as well as the Hansa Dusi and Fish River canoe marathons. “Three years ago, the Carling Black Label Cup was launched with the inclusion of a ‘Coach the Coach’ element to aid the development and up-skilling of coaches in the SAB League, equipping them with not only coaching skills, but life skills that can be transferred to the rest of the community,” he explains.

He says sport has played a powerful unifying role within the country. “It has offered Castle Lager a great platform from which to bring its brand proposition to life. The brand offer is all about togetherness and represents the best of South Africa and uniting the country around our three iconic national teams,” he says.

Sidenberg says BMi research conducted among the top 100 sponsoring companies showed a “significant 81% of sponsors now regard sponsorships as an integral part of their company/brand strategies”. He said alcohol companies spent a great deal of funds on advertising on sports events. Television would be the greatest loser as a result of an alcohol ad ban as alcohol advertising was most prominent during live sporting events, accounting for 73.5% of spending for companies. He told parliament that when tobacco advertising was banned, the impact wasn’t as significant as cellphone companies were waiting in the wings to close the gaps.

Sidenberg notes three telecommunications companies and three financial companies and account for in excess of R1 billion of total direct spend. ARA suggests the alcohol industry spends around R2.6 billion on sports sponsorships and below-the-line expenditure.

So what, then, will a proposed ban on alcohol advertising and sponsorship mean to the market?

“It will be significant, as SAB is among the largest sponsors of sport in South Africa, so it would be foolish to assume that the proposed ban would, if implemented, be anything but detrimental to the industry [and] more importantly to sport in South Africa,” says Franklin.

Instead of a clampdown, Sidenberg says, “let’s rather concentrate on using the power of sponsorship and our sporting heroes to up the game on responsible drinking messaging and carry on with anti-drunk driving campaigns”.

He says it is estimated South Africa’s economy stands to lose out on R7.4 billion if a “ban” on alcohol advertising is introduced, thousands of jobs would be lost and Bafana Bafana and the Proteas would be without a major sponsor.

“South African Breweries executive director of corporate affairs and transformation Vincent Maphai told members of parliament that the majority of South Africans (65%) did not consume alcohol and of those who did consume, only 8% abused the product. He said targeted interventions, not banning advertising, was required to address this ‘tiny community of irresponsible alcohol users’,” Sidenberg says.

There is little doubt that sponsorship continues to offer “authentic, engaging opportunities to connect with fans in increasingly innovative ways, which other marketing disciplines simply cannot offer”, says Sidenberg. “As a result of this, sponsorship continues to outperform the market.”

This story was first published in the March 2014 issue of The Media magazine.

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